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TMI Blog1949 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount as if it was an arrear of land-revenue, or as if a decree for that amount had been passed by a Civil Court. On 17th May, 1948, the Collector attached two bank-accounts of the applicant, in which the balance was about ₹ 600, under Order XXI, Rule 46, of the Civil Procedure Code. On 3rd August, 1948. the applicant was arrested and detained in a civil jail under Order XXI, Rule 40. On 25th August, 1948, a creditor, to whom the applicant owed about ₹ 24,000 presented a petition to the High Court for adjudicating the applicant an insolvent. On that application an order adjudicating the applicant as an insolvent was passed by the High Court on 30th August, 1948. The applicant then applied under Section 25 of the Presidency Towns Insolvency Act for protection from arrest and detention, but this application was rejected. An appeal was filed against that decision; and we have been informed at the bar that that appeal has been dismissed. On 10th November, 1948, the applicant's nephew made an application to this Court under Section 491 of the Criminal Procedure Code and prayed for the release of the applicant on the ground that his detention was illegal. That applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers conferred upon the Collector. Sub-section (2) of Section 46 of the Indian Income-tax Act provides as follows:- The Income-tax Officer may forward to the Collector a certificate under his signature specifying the amount of arrears due from an assessee, and the Collector, on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land-revenue: Provided that without prejudice, to any other powers of the Collector in this behalf, he shall for the purpose of recovering the said amount have the powers which under the Code of Civil Procedure, 1908. a Civil Court has for the purpose of the recovery of an amount due under a decree. The words without prejudice to any other powers of the Collector in this behalf contained in the proviso are important. They show that irrespective of any action which the Collector may take to recover the amount of income-tax as an arrear of land-revenue, it is open to him to exercise for the purpose of recovering this amount the powers which a Civil Court has for recovering a decretal debt. In other words, the Collector has two remedies, and he may pursue eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd-revenue or any other amount due to Government and recoverable as an arrear of land-revenue is the power to detain the defaulter in a civil jail. Mr. Seervai, who appeared for the applicant, laid considerable stress on the words cause him to be apprehended and confined in the civil jail under the rules in force at the Presidency for the confinement of debtors in paragraph 5 and argued that the rules referred to in the section are the provisions contained in the Civil Procedure Code for the arrest and detention of persons who default in payment of amounts due under decrees passed against them. It was urged that the provisions of the Civil Procedure Code should consequently be deemed to have been incorporated in the Bombay City Land Revenue Act. Section 58 of the Civil Procedure Code provides that the maximum period for which a debtor may be detained in a civil jail shall be six months. It was, therefore, contended that the maximum period for which the Collector could have detained the applicant for failure to pay the income-tax dues is six months, and that as this period has already expired the present detention of the applicant is unlawful. It is significant to note that whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If the intention of the Legislature was that the provisions of the Civil Procedure Code with respect to the arrest and detention of debtors should apply to persons ordered to be arrested under Section 13 of the Act, the Legislature would have used language similar to that used in Section 36 in this Section also. The different phraseology used in Section 13, therefore, also supports the conclusion that the rules referred to in this section are the rules framed for the confinement of Civil prisoners and. not the provisions of the Civil Procedure Code with regard to the arrest and detention of debtors. Assuming, however, that the rules referred to in Section 13 are the provisions of the Civil Procedure Code with regard to the arrest and detention of debtors, the question still arises whether the period of detention would be governed by these provisions in view of the proviso to Section 13, which states that the period of imprisonment shall in no case exceed one day for each rupee of the amount to be recovered. The Bombay City Land Revenue Act was enacted in 1876. The part of Section 13 relating to the apprehension and confinement of debtors has not been amended since then. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it would mean that, although the Collector has two different kinds of powers conferred upon him for realizing arrears, of income-tax viz., the powers vested in a Civil Court for recovering a decretal debt and the powers specified in Section 13 for recovering land revenue arrears, he can, in effect, exercise only one of them. This appears to be contrary to the intention of the Legislature as expressed in sub-section (2) of Section 46 of the Indian Income-tax Act. It was also urged that, unless a limited meaning is given to the proviso, it would be possible for the Collector to detain a defaulter for the whole period of his life if the amount due from him is some lakhs of rupees, as in the present case, and that this could not possibly have been intended by the Legislature. The powers conferred upon a responsible officer like the Collector are to be exercised by him reasonably and not capriciously or oppressively. As observed by the Privy Council in Babulal Choukhani v. The King Emperor [1938] LR 65 IA 15, it is the implied condition of the exercise of every discretionary power that the power will be exercised fairly and honestly. Merely because of the possibility that in some c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an ordinary defaulter. But, he argued that, as an adjudication order had been passed in respect of the detenue, all his property vested in the Official Assignee, that consequently there was no property which could be said to belong to him and which could be sold by the Collector for the realisation of the dues to Government, and that, therefore, the condition precedent was incapable of fulfilment. The scheme of Section 13 of the Act clearly is that the Collector should first proceed against so much of the property of the defaulter as is necessary to satisfy the Government demand, and if the sale of the defaulter's property does not produce an amount sufficient, to satisfy the demand, then only can the Collector cause the defaulter to be apprehended and confined in a civil jail. The arrest and confinement are intended to secure, if possible, the realisation of the balance of the demand either from him or from some one interested in him. Until the amount, of this balance is known, it would not be possible to determine the period for which the defaulter is to be confined. It is true that if the defaulter has no property at all, then it would be open to the Collector to procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. It is not disputed that the Collector can move the Court to sell the property of the insolvent defaulter. It is also possible for the Collector to institute proceedings himself for the sale of the property with the leave of the Court and on such terms as the Court may impose. Consequently, even though by reason of the adjudication order the property of the detenue vests in the Official Assignee, it is still capable of being sold for the realization of Government dues. It was further argued by the Advocate-General that even if the property is regarded as the property of the defaulter, who has become insolvent, the Collector could not levy attachment thereon and effect its sale under Section 13 of the Bombay City Land Revenue Act. We are not satisfied that this contention is correct. Once the leave of the Court is obtained under Section 17 of the Insolvency Act, the only bar to proceeding against the defaulter's property in the ordinary way is removed, and the Collector cou1d attach and sell the property in the usual manner, subject to such terms as the Court has deemed fit to impose. The sale proceeds will no doubt vest in the Official Assignee, but the Collector can reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and I pointed out that it was possible for me to recover part of the time barred claims if I was free to approach my debtors. The position of the part of my assets is also such that it would realise a much better price if sold by me. The shares of the private limited companies have no value in the market, but if I am allowed to carry on business in the name of these two companies there is a possibilitywith my valuable business contacts in India and outside of my being able to pay off a substantial part of my debts. It was therefore urged by the Advocate-General that a sale of the applicant's assets would not have realized any appreciable amount. It was also argued by him that the demand is for over ten lakhs of rupees, that even the applicant himself has valued his property at about ₹ 8,00,000, and that, therefore, in any case there would be a deficit of over ₹ 2,00,000, for which the detention of the applicant would be justified. The exact value of the property can be ascertained only when the property is actually sold and then only it could be said, definitely whether, it is or is not sufficient to satisfy the demand, and if it is not, what the amount of def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court acts in the exercise of its original jurisdiction. It is only the High Court and not any subordinate Court which can exercise powers under this section. Applications under this section are therefore made to the High Court only. They do not come before it by way of appeal or revision against the orders of subordinate Courts. In fact such applications were formerly heard on the Original Side of the High Court by a single Judge. Later on the rules were modified, and it is now provided in rule 60 of the Appellate Side Rules that all applications under Section 491 of the Criminal Procedure Code shall be made to the Division Court taking criminal business of the Appellate Side of the High Court. The fact that such applications are heard by a Division Court doing criminal work would not alter the position that it is only in the exercise of its original jurisdiction that the High Court entertains such applications. It cannot also be disputed that in ordering the arrest of the applicant for failure to pay the income-tax the Collector was doing an act in the collection of revenue . The question for consideration, there fore, is whether this act was done according to the law fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 773 have observed as follows:- It is settled law that the exclusion of the jurisdiction of the civil Courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. In Province of Bombay's case (supra) it has been stated:- The appellant maintains that the subject-matter of the present suit is an objection to the amount, incidence or mode of assessment of land revenue, within the meaning of Section 4(b), but Sir Cyril Rad-cliffe, on behalf of the appellant, rightly conceded that the civil Courts have jurisdiction to determine a question as to excess of the statutory powers conferred by the Code. Mr. Seervai therefore argued that the protection given by Section 226 of the Government of India Act, 1935, is only in respect of acts which have been done according to the law for the time being in force, and that as the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the usage and practice of the country, and the Regulations of the Governor and Council. But upon this supposition the proviso is wholly nugatory; for if the Supreme Court is to inquire whether the defendants in this matter concerning the public revenue were right in the demand made, and to decide in their favour only if they acted in entire conformity to the Regulations of the Governor and Council of Bombay, they would equally be entitled to succeed, if the Statutes and the Charters contained no exception or proviso for their protection. Our books actually swarm with decisions putting a contrary construction upon such enactments, and there can be no rule more firmly established, than that if parties bonafide and not absurdly believe that they are acting in pursuance of Statutes and according to law, they are entitled to the special protection which the Legislature intended for them, although they have done an illegal act. Dealing with the argument that the above interpretation might deprive the aggrieved party of any remedy, Lord Campbell stated (page 378): Whether the plaintiff might have redress before any other tribunal, can only be material in a doubtful constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following words ILR 1939 Bom. 320:- It seems to me, however, that the object of the statute plainly was to bar the jurisdiction of the Courts in any matter concerning the revenue and for the purpose of protecting the revenue. Therefore, in a protective statute of this nature it is difficult to construe the words in the latter part of the section in their literal and etymological meaning. For, it is obvious that if an act is done by the revenue authorities for the purpose of collecting the revenue, which they consider to be properly leviable in accordance with law, no special statutory protection is needed. The act is done in accordance with law and can never give rise to any cause of action against the officers or the Secreatary of State. He quoted some observations made by Lord Campbell in Spooner v. Juddow [1848-50] 4 MIA 353. and the following passage from Maxwell on the interpretation of Statutes (9th Edn.) at page 239:- It is obvious that the provisions in numerous statutes which limit the time and regulate the procedure for legal proceedings for compensation for acts done in the execution of his office by a justice or other person, or 'under' or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case (supra), a suit was filed before the Calcutta High Court for a declaration that certain provisions of the Income-tax Act were ultra vires and for consequential refund. It was contended on behalf of Government that the suit was not maintainable in view of Section 226 of the Government of India Act, 1935. The Calcutta High Court by a majority of two to one overruled this objection on the ground that a matter can be held to concern revenue only when the law under which the revenue was claimed was itself valid, and that as in the Court's view the relevant provisions of the law were invalid, the suit must be held to relate not to revenue, but to an illegal exaction. This view was not accepted by the Federal Court. In his judgment Spens, C.J., stated:- The learned Judges say that where the law imposing the revenue is itself illegal, a dispute in relation to it cannot be said to concern the 'revenue'. This argument, if pursued to its logical limits, will prove too much. If even under a valid revenue law a person who is not liable to be assessed is sought to be assessed to revenue, that claim may well be described as an 'illegal' claim against him. Again, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of its jurisdiction in the matter. Spens, C.J., in his judgment at pages 491-492 observed as follows:- But in our view the more important question in this case is whether the act ordered or done in the collection of the revenue must in truth and in fact have been 'according to the law for the time being in force', or whether it is sufficient that the person or persons ordering or doing the act should bonafide and not absurdly have believed that the act was 'according to the law for the time being in force'. Counsel for the appellant pressed us with the view that the latter only was sufficient to bring this case within Section 226(1), and he relied upon the well-known case of Spooner v. Juddow [1848-50] 4 MIA 353. The learned Judges in the Court below were able to come to the conclusion that the principles of Spooner's case (supra) , did not apply when the complaint was that the .whole procedure was not according to the law for the time being in force, or that the revenue authorities had no legal power to do what they had done, as opposed to the complaint of some irregularity in carrying out procedure authorised by law or an irregularity in doing something ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d value of ₹ 6,65,000 (which shares are not marketable) and time-barred claims on promissory notes. It is, therefore, very unlikely that any appreciable portion of the income-tax dues could be realised by the Official Assignee by the sale of the assets vested in him. I further say that the condition imposed by Section 13 of the Bombay City Land Revenue Act, 1876, as regards attachment and sale of the petitioner's assets cannot be fulfilled in this case, as the petitioner has been adjudged an insolvent and all his assets have therefore been placed out of the reach of the Collector of Bombay, having 'become vested in the Official Assignee of Bombay, by operation of law. In view of the above fact, it is not open to me to sell any of the petitioner's assets and the said condition imposed by Section 13 of the Land Revenue Act cannot, therefore, be fulfilled. After consideration of all the aforesaid facts and after hearing the petitioner's counsel Mr. K.M. Munshi and after having bona fide and honestly exercised the discretion vested in me by law I was of opinion that the income-tax dues would not be realised if the petitioner was released and it was, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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